Microsoft to cut 18,000 jobs this year as it trims Nokia

Focusing on cloud computing, mobile services

By Bill Rigby

07/17/2014|hrreporter.com|Last Updated: 07/17/2014

SEATTLE (Reuters) — Microsoft Corp. said on Thursday it will slash up to 18,000 jobs, or 14 per cent of its workforce, this year as it trims its newly acquired Nokia phone business and reshapes itself into a cloud-computing and mobile-friendly software company.

The deepest job cuts in the company's 39-year history come five months into the tenure of CEO Satya Nadella, who outlined plans for a "leaner" business in a public memo to employees last week.

About 12,500 of the layoffs will come from eliminating overlaps with the Nokia unit, which Microsoft acquired in April for $7.2 billion. Microsoft did not say how many jobs would come from Nokia and how many from existing operations. The acquisition of Nokia's handset business in April added 25,000 people to Microsoft, pushing its overall headcount up to 127,000.

The Nokia-related cuts were widely expected. Microsoft said when it struck the deal that it would cut $600 million per year in costs within 18 months of closing the acquisition.

Microsoft did not detail exactly where the remaining jobs would be cut, but said the first wave of layoffs would affect 1,351 jobs in the Seattle area.

The company said it expects to take pretax charges of $1.1 billion to $1.6 billion over the next four quarters to account for the costs of the layoffs.

Nadella's cuts are the biggest at the Redmond, Wash.-based company since predecessor Steve Ballmer axed 5,800, or about six per cent of headcount, in the depths of the recession in early 2009.

The new CEO's moves are designed to help Microsoft shift from being a primarily software-focused company to one that sells online services, apps and devices it hopes will make people and businesses more productive. Nadella needs to make Microsoft a stronger competitor to Google and Apple, which have dominated the new era of mobile-centric computing.

Marking this change of emphasis, Nadella last week rebranded Microsoft as "the productivity and platform company for the mobile-first and cloud-first world."

Not alone

Microsoft is not alone among the pioneers of the personal computer revolution now slimming down to adapt to the Web-focused world. PC-maker Hewlett-Packard is in the midst of a radical three-to-five-year plan that will lop up to 50,000 from its staff of 250,000.

IBM is undergoing a "workforce rebalancing," which analysts say could mean 13,000, or about three per cent of its staff, being laid off or transferred to new owners as units are sold.

Chipmaker Intel and network equipment maker Cisco Systems both said in the past year they were cutting about five per cent of their staffs.